Banks’ NPL ratio up to 4.14% in January

MANILA, Philippines — After easing for four straight months to below four percent, the Bangko Sentral ng Pilipinas (BSP) reported an uptick in the gross non-performing loan (NPL) ratio of Philippine banks, to 4.14 percent in January from 3.99 percent in December.

Latest data from the central bank showed the NPLs or soured loans of the banking sector went up by 16.7 percent to P461.66 billion in January from P395.46 billion in the same month last year.

The NPL ratio of Philippine banks stayed above four percent from February to November last year due to uncertainties brought about by the pandemic. The ratio peaked last year at a 13-year high of 4.51 percent in July and August before declining steadily to 3.99 percent in December.

Despite the uptick, BSP Governor Benjamin Diokno earlier said in a virtual forum that the NPL ratio of the Philippine banking system is far from the double-digit levels seen in the Asian financial crisis.

The monthly NPLs or past due loan accounts – wherein the principal or interest is unpaid for 30 days or more after due date – rose steadily from January to August last year, but declined gradually between September and December 2021.

The central bank said credit growth accelerated to 4.9 percent to P11.14 trillion in January from P10.62 trillion in the same month last year.

Data showed that the past due loans – referring to all types of loans left unsettled beyond payment date – increased by six percent to P539.42 billion from P508.96 billion for a past due ratio of 4.84 percent.

The industry’s restructured loans jumped by 81.8 percent to P356.45 billion in January from P196.05 billion in the same month last year, translating to a restructured loan ratio of 3.2 percent.

Amid the rising soured loans, the sector’s allowance for credit losses went up by 8.5 percent to P402.89 billion from P371.17 billion for a higher loan loss reverse level of 3.62 percent.

This translated to an NPL coverage ratio of 87.27 percent, lower than the previous year’s 93.86 percent.

Diokno said Philippine banks have ample loan-loss provisioning and remain well capitalized.

The BSP sees the NPL ratio of Philippine banks accelerating and peaking at 8.2 percent this year.

“The BSP will continue to closely monitor the impact of emerging COVID variants on the banking system. Supervisory and surveillance tools have been strengthened to ensure that appropriate focus and attention are placed on this area,” Diokno said.

Economic managers expect a faster gross domestic product (GDP) growth of seven to nine percent this year after the country excited the pandemic-induced recession with an expansion of 5.6 percent last year, reversing the 9.6 percent contraction in 2020.

“Two years since the onset of the pandemic, the economy is on its way to recovery, thanks in part to swift and decisive actions by the government. The government’s mass vaccination program is picking up pace and scope and is expected to accelerate further,” the BSP chief said.

On the other hand, S&P Global Ratings believes the industry’s NPL ratio already peaked at 4.5 percent last year and is expected to decline with the implementation of Republic Act 11523 or the Financial Institutions Strategic Transfer (FIST) Act.

The BSP sees banks offloading P152 billion worth of bad assets via the FIST Law, helping reduce the NPL ratio of the banking sector by 0.63 to 0.71 percentage points.

S&P sees a faster credit growth of five to seven percent this year as the economy continues to bounce back from the pandemic-induced recession.

Loans disbursed by big banks grew at a faster rate of 8.5 percent to P9.44 trillion in January from P8.69 trillion in the same month last year.